R3- M7- State and Local Tax Issues Flashcards

1 State Income Tax Considerations: Part 1 2 State Income Tax Considerations: Part 2

1
Q

Federal law that protect Taxpayers from the state from imposing Income tax on interstate transactions

Public Law No. 86-272

A

If multiple states involved, you only have to pay to the state that has the nexus

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

There is no NEXUS or minimum contact so state cannot impose income tax

A

ALL SHOULD BE PRESENT

AMAZON!

1 Only business with the state involves solicitation of orders for sale of tangible personal property

  1. Orders are sent outside for acceptance/ rejections. Buyers are out of that state
  2. If orders accepted, they are filled by a delivery or shipment outside of the state
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

NEXUS Prohibition #1 does not APPLY which means persons are liable to pay state income tax

PERSONS INLCUDE

Individuals
partnership
corporations
LLC

A
  1. Individual domiciled/resident on that state then still they have to pay the state tax
  2. Corporations incorporated under the laws of that state- so LLC and partnerships are still protected
  3. the orders does not qualify as tangible personal property- of its sale of service or other product
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

NEXUS Prohibition #2 does not APPLY which means persons are liable to pay state income tax

A

if

  1. Sales and use tax
  2. Franchise Tax
  3. Gross receipts tax- occupation, commercial activity, business
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

ALLOCATION of Federal Income / LOSS

Line 28 Page 1 F 1120

Federal Taxable income BEFORE

NOL
DRD

A

BELOW ARE NON BUSINESS INCOME

  1. Allocation removing NON BUSINESS INCOME

Assign this NBI to a state of commercial domicile (residence) where they should be taxed

Investment Income
Dividends
Capital Gains from stock sale

  1. Other income - rent or sale of rental property to the state where the property is located.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

APPORTIONMENT of Federal Income / LOSS

A

BUSINESS INCOME - income that is NOT allocated entirely to a state. that will be apportioned.

GENERALLY INCOME FROM PRIMARY BUSINESS ARE APPORTIONABLE ITEMS

  1. Standard Apportionment factors- based on property, payroll and sales
  2. Apportionable Business income (NOT ALLOCATED INCOME)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Standard Apportionment Factor

A

State share= Allocable (NOn business income) + Apportionment share

State apportionment = Apportionment factor X Total apportionable income (Total Business income)

Apportionment Factor

= ((Property/rent expense/ Total property)+ (Payroll paid employees/ Total Payroll) + (Sales from sources/ Total Sales)) divided by 3

How well did you know this?
1
Not at all
2
3
4
5
Perfectly